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How to Identify Relative Strength When Buying Stocks

Stocks & Euro Negatively Reverse

Wednesday marked Day 2 of a new rally attempt for the benchmark S&P 500 index but the other major averages have yet to mark Day 1 which is a negative divergence. That said, as long Tuesday’s lows are not breached in the S&P 500, the earliest a proper follow-through day (FTD) could occur would be Friday. However, if at anytime, Tuesday’s lows are breached, then the day count will be reset. What does all of this mean for investors? Simple, the market remains in a correction which reiterates the importance of adopting a strong defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 26, 2010

Stocks Rally After Hitting Fresh 2010 Lows

All the major averages sliced below Friday’s lows which effectively ended the current rally attempt and reset the base count. However, the S&P 500 managed to close higher for the day which marked Day 1 of a new rally attempt for that index. In addition, the earliest a proper follow-through day (FTD) could occur would be Friday, providing Tuesday’s lows are not breached. However, if at anytime, Tuesday’s lows are breached, then the day count will be reset. What does all of this mean for investors? Simple, the market remains in a correction which reiterates the importance of adopting a strong defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 25, 2010

Stocks Edge Lower As EU Debt Woes Spread

Monday, May 24, 2010 Stock Market Commentary: The major averages ended lower as the dollar rallied after European debt woes continued to spread. As expected volume was

Adam Sarhan May 24, 2010

Day 1 Of A New Rally Attempt

Stocks took a heavy beating on Thursday, sending all the major averages below their respective 200 DMA lines on heavy volume. Stocks ended higher on Friday after the S&P 500, Russell 2000 and Nasdaq Composite all shook out below their May 6, 2010 (flash crash) low. For the week, all the major averages suffered tremendous losses and fell over -10% from their late April highs, which is the first time a pullback of that magnitude has occurred since the March 2009 low. The fact that the market rallied on Friday technically marked Day 1 of a new rally attempt which means the earliest a proper follow-through day (FTD) could occur would be Wednesday, providing Friday’s lows are not breached. However, if at anytime, Friday’s lows are breached, then the day count will be reset. What does all of this mean for investors? Simple, the market remains in a correction which reiterates the importance of adopting a strong defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 21, 2010

Stocks Plunge Below 200 DMA line On Heavy Volume

At this point, all the major averages sliced and closed below their respective 200 DMA lines which suggests lower prices will likely follow. Furthermore, the NYSE composite undercut its Thursday, May 6, 2010 low (Flash crash) which bodes poorly for this market. In addition, all the major averages are now down over -10% from their late April highs which is the first time that occurred since the March 2009 low. On Wednesday, all the major averages undercut their recent lows which means the day count was reset and we are now looking for Day 1 of a new rally attempt to occur. What does all of this mean for investors? Simple, the market remains in a correction which reiterates the importance of adopting a strong defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 20, 2010

Market Remains In A Correction; Day Count Reset

All the major averages sliced below their recent lows which means the day count is reset and we are now looking for Day 1 of a new rally attempt to occur. At this point, the 200 DMA line (i.e. 40 week-moving average) remains support for all the major averages while the 50 DMA line is resistance. If the 200 DMA line is breached, on a closing basis, then odds favor lower prices will follow. The converse is also true. Until either event occurs, we should expect this sideways action (between the 50 & 200 DMA line) to continue. What does all of this mean for investors? Simple, the market remains in a correction which reiterates the importance of adopting a strong defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 19, 2010

Stocks, Euro & Commodities Negatively Reverse As Dollar Soars!

The NYSE Composite Index closed below its 200 DMA line for the third straight session which is not a healthy sign. The Nasdaq Composite and S&P 500 Index did not undercut Monday’s lows which technically means that Tuesday marked Day 2 of their current rally attempt and the earliest a possible FTD can emerge for either index would be Thursday. However, if yesterday’s lows are breached then the day count will be reset. Meanwhile, the Dow Jones Industrial Average has yet to violate last Monday’s low, which means that it just finished Day 7 of its current rally attempt and the window for a proper FTD remains open (unless its 5/10/10 low of 10,386 is breached). What does all of this mean for investors? Simple, the market is in a correction which reiterates the importance of adopting a defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 18, 2010

Stocks End Higher As Crude & Copper Slice Below 200 DMA Lines

The NYSE composite closed below its respective 200 DMA line for the second straight session which is not a healthy sign. Furthermore, the S&P 500 and the Nasdaq composite undercut last Monday’s lows which means the day count has been reset for those indexes. However, the Dow Jones Industrial Average has yet to violate last Monday’s low which means that it just finished Day 6 of its current rally attempt and the window for a proper FTD remains open (until 5.10.10’s low of 10,386 is breached). What does all this mean for investors? Simple, the market is in a correction which reiterates the importance of adopting a defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 17, 2010

Week In Review; 50 DMA Line Is Resistance

The bears returned from a three day hiatus on Thursday afternoon and erased Wednesday’s gains, sending the DJIA and the Nasdaq composite back below their respective 50 DMA lines. In addition, volume was heavier than the recent advance which was not a healthy sign. The highly influential financial group continues to lag its peers, evidenced by the lackluster action in several key names. Most of the major financial firms are now trading below both their respective 50 DMA and 200 DMA lines, which is another ominous sign. Stocks got smacked on Friday after news spread that French President Nicolas Sarkozy threatened to leave the EU if the trillion dollar bailout was not passed. Again, volume rose as the major averages fell. What does all this mean for investors? Simple, the market is in a correction which reiterates the importance of adopting a defense stance until a new rally is confirmed. Trade accordingly.

Adam Sarhan May 14, 2010

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